ARCHIVED -  Public Notice CRTC 1995-89

Public Notice

Ottawa, 2 June 1995

Public Notice CRTC 1995-89

Adjustments to the Cable Production Fund Guidelines

Background

In Public Notice CRTC 1993-74 dated 3 June 1993 entitled Structural Public Hearing, the Commission announced the creation of a mechanism having the potential to generate approximately $300 million over 5 years from the cable television industry for the production of new Canadian programming (the Cable Production Fund; CPF).

In Public Notice CRTC 1993-105 dated 15 July 1993, the Commission called for comments as to what policies should govern the CPF, having regard to such matters as program eligibility, access and funding. Among other questions raised, the Commission requested comments on the structure of the administration of the fund and on policies regarding the regional distribution of funds.

Subsequently, the Commission issued Public Notice CRTC 1993-137 dated 7 October 1993, requesting comments on proposed changes to the Cable Television Regulations, 1986 (the regulations) to give effect to the funding mechanism. In Public Notice CRTC 1994-7 dated 3 February 1994, following consideration of comments received, the Commission announced that it had adopted the proposed changes to the regulations.

Finally, in Public Notice CRTC 1994-10 dated 10 February 1994 entitled "The Production Fund", the Commission announced its determination regarding the fundamental operating principles and guidelines for the CPF.

The Commission´s Guidelines

Among the Commission's conclusions set out in its February 1994 notice was that the main focus of the CPF should be on measures to ensure the broadcast of high quality Canadian programs in under-represented categories in peak viewing periods.

The Commission noted that, while producers have consistently argued that the licence fees paid by Canadian broadcasters make it difficult to produce programs of high quality, broadcasters have long claimed that they cannot afford to pay licence fees any greater than those they have traditionally paid. The Commission's task, then, was to develop a mechanism for raising licence fees, while ensuring they remain affordable to broadcasters.

Under the guidelines announced by the Commission, funding for a drama program would be contingent upon there being up-front commitments from Canadian programming undertakings to pay licence fees of not less than 35% of the total budget of the program. In order for other types of under-represented programming to be eligible for funding from the CPF, there would have to be commitments from Canadian programming undertakings to pay licence fees representing not less than 15% of the total budget. The Commission was satisfied that licence fees set at these minimum levels would represent an increase in the fees now earned by independent Canadian producers.

In accordance with the Commission's guidelines, the CPF would assume responsibility for 30% of the total financial commitment made by Canadian programming undertakings in respect of licence fees for an eligible program. The portion of the licence fee covered by the CPF was to be paid directly to the producer of the program. Canadian programming undertakings would nevertheless be able to claim the full amount of their commitments to licence fees against conditions of licence or expectations with respect to their expenditures on Canadian programs.

Financial support from the CPF would be contingent upon a further requirement, namely the presence of provisions in licence agreements that all programs (other than children´s) must be broadcast during the peak viewing hours of 7:00 p.m. to 11:00 p.m. The stipulation with respect to programs targeted to children was that they must be aired when the largest audiences of children are available.

Proposed Adjustments to the Guidelines

The CPF is administered by an independent Board that represents the Canadian production community, the cable industry and Canadian public, private and pay and specialty broadcasters. Earlier this year, the CPF's Board sent a paper to most members of the production and broadcast community, outlining its proposals for adjustments to the funding guidelines. Subsequently, consultations were held in 8 cities across the country, to which 500 broadcasters and producers were invited.

Following these consultations, the CPF's Board concluded that special guidelines were needed in respect of "regional productions", due to the fact that lower licence fees are typically paid by regionally-based, non-network broadcasters. The full text of the CPF definition of a regional production is contained in the appendix to this notice.

The Board also concluded that the licence fee threshold and broad- caster contribution requirements were too low for non-drama categories, and that these factors would have the unintended impact of depressing licence fee payments.

Further, the Board was concerned that the monies available within the CPF would be significantly under-utilized unless its contributions to individual programs is increased.

On 13 March 1995, the Chair of the CPF sent a letter to the Commission requesting adjustments to the Commission's guidelines for the purpose of addressing the concerns outlined above. Specifically, it was proposed that:

* the CPF's share of funding for national drama productions be increased from 30% to 35% of the licence fee commitments of Canadian programming undertakings;

* the CPF's share of funding for regional drama productions be increased from 30% to 43% of licence fee commitments;

* the threshold level of licence fee commitments by programming undertakings for children´s, documentary and variety or music and dance programs be increased from 15% to 25% of the total production costs, and that the CPF's share of such licence fee commitments be increased from 30% to 40%; and

* programming that is directed to youth (those 12 to 17 years of age), that meets the requirements pertaining to minimum licence fee commitments by Canadian programming undertakings, and that is broadcast between the hours of 4:00 p.m. and 11:00 p.m., be eligible for funding.

The Commission has considered the Board's proposals for adjustments to the funding guidelines. In the Commission's view, the Board should have the discretion for determining how best to carry out its responsibilities in an effective manner. The Commission is also satisfied that the Board is best positioned to formulate recommendations for any adjustments to the mechanism by which CPF's funds will be allocated. The Commission notes in this regard that it has also received letters from producers regarding a number of issues, including those raised by the CPF. Given the wide representation of the Board, however, the Commission is not prepared at this time to consider any adjustments other that those proposed by the CPF.

The Commission is generally satisfied with the thoroughness of the consultative approach used by the Board in arriving at these recommendations, and therefore accepts the modified guidelines, as proposed by the Board, for application during the current and following operating years.

Nevertheless, the Commission considers that its original purpose, that being to increase the licence fees paid by broadcasters to independent producers, continues to be of primary importance. It therefore requests the Board to track the impact of these adjustments on the licence fees being paid by broadcasters in order to evaluate the adjusted guidelines during the current and following operating years, and to report its findings to the Commission before the end of the period.

Finally, the Commission reiterates that, for the purpose of meeting their required Canadian program expenditures, as expressed either in expectations or conditions attached to their licences, the licensees of private programming undertakings will be permitted to claim the full amount of the licence fee, including that portion contributed by the CPF, as eligible Canadian programming expenditures.

Allan J. Darling
Secretary General

APPENDIX

 A "regional production" is a program that

 (i) originates in the regions (defined for CPF purposes as being more than 150 km from either Toronto or Montréal)

(ii) is produced by an eligible Independent Producer or Broadcaster-affiliated Production Company whose base of operation is in the regions (a "regional producer"), and

 (iii) is broadcast by a Canadian Broadcaster which, subject to the following exceptions, is not itself a licenced network operator within the meaning of the Television Broadcasting Regulations passed under the Broadcasting Act (a "broadcasting network operator").

For greater certainty, pay television or specialty service licensees and educational television programming services are not broadcasting network operators for the foregoing purpose.

A program will not be an eligible regional production if a regional producer based in Vancouver co-produces or partners in the production of the program with an Independent Producer or Broadcaster-affiliated Production Company based within 150 km of Toronto or Montréal.

A program produced pursuant to a co-production or partnership between a regional producer (other than a Vancouver based regional producer) and a Montréal or Toronto based Independent Producer or Broadcaster-affiliated Production Company may be considered an eligible regional production if the regional producer is a genuine partner in the production and, as such, has a significant and meaningful role as "producer" of the program.